Dol”drum” Feelings:
Sentiment in the energy group presently is at the bottom of the barrel, pun intended. Since the market rally roughly one month ago energy, measured by the XLE is the only one of the major 11 S&P sectors in the red (on a 3-month look back period it is dead last too). Major M&A activity has done little to boost confidence in the space, and these deals were done for very little premium. XOM and CVX purchased PXD and HES, and both of these major charts have been lackluster until late last week. CVX broke ABOVE a bear flag, and XOM recorded a bullish harami Friday just above the very round-par number. My belief is there will be a need for oil for a lot longer than many want to think or believe and for that reason I favor equipment. Think of them as the “picks and shovels” in the space. The chart of the OIH below shows a possible bear trap below its 200-day SMA recently, and I would be sanguine on the group as long as this instrument CLOSES above 300.